The Danone Syndrome

There are so many amazing things about the French.

You all remember the outrage of the French government, politicians and public, at the rumors of national fleuron Danone being bought out by American PepsiCo?

Jack reacted accordingly, saying "NON !" (again!?):

President Jacques Chirac called Wednesday for measures to defend French companies from foreign takeover, a week after rumors of an imminent PepsiCo bid for Paris-based Danone sparked public indignation and pledges of government intervention.

Chirac asked ministers to come up with new proposals to "reinforce the protection of our strategic companies," in comments relayed to reporters by the government's official spokesman, Jean-Francois Cope.

"Last week was marked by strong concern about the possible takeover of a French company by a foreign group," Chirac said.

The Danone affair highlighted the vulnerability of many French companies and the fragmentation of their capital, he said, which "carries risks for employment and for our industrial strength."

Shares in Danone, whose brands include Dannon yogurt and Evian water, soared last week amid rumors of an imminent bid from PepsiCo — partly fueled by a series of government comments signaling readiness to oppose any takeover attempt by the maker of Pepsi-Cola, Tropicana juices and Fritos chips.

So Jack and his gang are against all takeovers? Well, not exactly (and you'll understand why later):

While blanket opposition to all foreign takeovers was "out of the question," Chirac said, the government should "examine whether changes are needed in company law or accounting standards in order to encourage long-term investment."

He also called for "mobilization" among banks, investment and pension funds, mutual funds and insurers to encourage more stable, long-term investment in French companies and greater participation by employees.

Laurence Boone, an economist with Barclays Capital in Paris, said massive investment in French companies by foreign pension funds heightened public fears that the country's industrial and corporate jewels are falling into foreign hands.

(...)

Chirac's intervention is also bound to dismay foreign investors, Boone added, and overshadow pro-market achievements like the watering down of the 35-hour workweek — which the government is unwilling to trumpet for fear of handing ammunition to the Socialists two years before elections.

"It's just going to reinforce the message that France sent by voting 'no' to the EU constitution [in a May referendum]," she said, "that France is conservative, resisting globalization and doesn't understand the modern world."

Well, again, not really. It's just that, visibly, globalization is a one-way street for the French. EU Rota has a good post about it. And again this morning, I found another French fleuron is planning a hostile takeover itself:

French building materials maker Compagnie de Saint-Gobain SA Wednesday said it would launch a $6.5 billion hostile takeover bid for BPB PLC, after the British plasterboard maker twice rejected previous friendly offers.

Saint-Gobain, one of the world's largest suppliers of glass, insulation and other building materials, took the decision to appeal directly to BPB shareholders "reluctantly," the company's chief operating officer Pierre-Andre de Chalendar said in a conference call.

"We are very disappointed by the BPB board's reaction," de Chalendar said. "So far BPB has not been willing to engage in any dialogue with us, so Saint-Gobain has no option other than to put its proposal to BPB shareholders directly."

I do believe comments are not necessary.

Meanwhile, we still don't know who launched the rumors about a Danone takeover. But we're learning. Could it possibly be a case of... Insider trading?

Just over three weeks ago, a French business magazine, Challenges, published what it called a "new rumor" about a takeover of the French multinational company Danone by PepsiCo, the American food and beverage giant. The one-paragraph article sparked a political furor in France and pushed Danone's stock market value up by as much as 5 billion.

What the magazine did not disclose is that one of its columnists and editorial consultants, Christine Mital, is the sister of Danone's chief executive officer, Franck Riboud.

The conclusion of all this has been rightly delivered by the head of French beverage group Pernod Ricard:

"You cannot be pleased when Pernod Ricard buys a British company, but then say that the foreigners do not have the right to take over French companies," Ricard was quoted as saying.

Go tell Jack and his supposedly pro free-markets, socialist Nicolas Sarkozy:

Chirac weighed in after Interior Minister Nicolas Sarkozy, his political rival and a likely 2007 presidential contender, said the government "could not remain passive" in the face of a takeover bid.

"If a hostile offer is launched against Danone," Sarkozy said in an interview published by Le Monde on Thursday, the government should make every effort to "block the offensive."